Are business losses due to Covid-19 covered by insurance? ~ Insurance Academy
Covid-19, like it or not, has had a huge impact on the economy. Reported from CNBC news (11/04/2020), 1.5 million Indonesians have lost their jobs due to COVID-19.
Entrepreneurs lose out as supply and demand decline. Two industrial sectors affected include pharmaceuticals and textiles. Both sectors have been receiving raw material supplies from China. For example, 60-62% of raw material supply for the pharmaceutical industry comes from Hubei province, which is the epicenter of the COVID-19 outbreak. Uncertainty in the delivery of raw materials can certainly cause business disruption to industry players.
So, are business losses due to Covid-19 covered by insurance in a property insurance policy? In the Property All Risk policy, losses due to business interruption are one of the objects insured in Section II of the PAR Munich Re wording policy. In wording, business interruption is guaranteed if accompanied by damage / loss of property covered in Section I. This is stated in the wording:
“The insurer shall indemnify the insured for a loss of the interest insured unless specifically excluded if at any time during the period the property insured under the property damage section suffers loss or damage indemnifiable under the property damage section or which would have been indemnifiable under the property damage section but for the application of a deductible, thereby causing an interruption of or interference with the business insured.”
Business disruptions that occur as a result of the COVID-19 pandemic do not involve any damage or material loss experienced by business actors. This means that if the policy used in an insurance coverage is a standard Munich Re policy, the loss arising from the business interruption cannot be covered by the insurer.
In addition, it should also be noted that all losses caused by infectious diseases, such as COVID-19, cannot be covered because they are included in the exception to generally accepted standards. Some insurers now include a “Pandemic/ Epidemic/Coronavirus Disease Exclusion Clause” clause, to emphasize the general exclusion in wording.
Aan / Bogor / 27 Apr 2020
